Abstract
We examine the time-varying effect of stock market volatility due to infectious diseases on industrial sectors in the US from 2012 to 2021. We extend the current literature by exploring the diverse impact of infectious diseases on various industrial sectors and decomposing industrial volatility into good and bad volatility to quantify how good and bad components vary in response to the transmission of shocks due to infectious diseases. The results show that the transmission of volatile shocks from the stock market more strongly enhances the good component of industrial volatility as compared with bad volatility during COVID-19. We conclude that the relationship between infectious disease equity market volatility and industrial volatility depends on the good and bad volatile components and their respective conditions at different quantiles.